Mesophase separation has been identified in a polycation/anionic -nonionic mixed micelle system formed by the coacervation of poly(diallyldimethylammoniumchloride)/sodium dodecylsulfate-Triton X-100 in 0.40 M NaCl. The resultant dense, optically clear fluid was studied by turbidity, dynamic light scattering (DLS), and theology. The presence of two diffusion modes in DLS points to microscopic heterogeneity: coexistence of micelle-rich (dense) domains with micelle-poor (dilute) domains. With an increase in temperature above 20 degrees C, the turbidity rises rapidly along with the intensity of the slow mode. The concomitant decrease in the diffusivity of the slow mode signals an increase in the effective viscosity of the dense domain. With further increase in temperature, dramatic shear thinning is observed, and finally, macroscopic phase separation can be identified by centrifugation. At a temperature near that for quiescent phase separation, we observe shear-induced phase separation. We propose a mechanism to explain the connection between temperature- and shear-induced mesophase separation.